Silver is emerging as the new gold. Today the price of the metal rallied in one of the sharpest moves with spot silver closing 4.8 per cent higher at Rs 54,850 per kg and MCX September futures trading above Rs 55,600 per kg.
The rally, set since March end, has delivered a 39 per cent return to investors as against 14.3 per cent for gold. Silver had been a laggard for many months as compared to gold. Now it is marching towards Rs 60,000 per kg.
However, gold price also rallied today. On MCX, the metal was trading at Rs 49,200 per 10 grams while in the Physical market, with standard gold closing 0.5 per cent higher at Rs 49,242 per 10 grams. The gold-to-silver price ratio, which reflects the relative strength of these metals against each other, has decreased to 88.8. It went as high as 124 early this calendar year.
“As expected, silver rallied and hit an over four-year peak (of Rs 55,600) as a spike in Covid-19 infections, supply concerns and hopes for increased stimulus measures supported safe-haven demand. Support was seen from Comex Silver which jumped to $20 an ounce, the highest since September 2016. Silver is likely to continue its bullish momentum despite Overbought readings,” said Ajay Kedia, Kedia Advisory, Mumbai. International gold price was trading around $1,826 an ounce.
Generally silver prices follow gold. Recently gold prices touched a lifetime high of Rs 49,348 per 10 grams, and now silver is following the gold trend. Johns Hopkins University revealed that coronavirus cases rose to more than 14.5 million globally, with the death toll at nearly 600,000.
Anuj Gupta, AVP, Angel Broking, said, “Globally industrial demand has also increased and ETF demand also supported Silver. The holding of the biggest Silver ETF, Blackrock's ishare silver trust, has surged by $2.45 billion to $9.72 billion this year. In India, good monsoon is also one of the reasons for the increase in silver prices. Demand for silver jewellery in rural areas has also supported prices. We expect silver to test Rs 58,000-60,000 levels soon. Festival demand is also supportive of Silver, as people may purchase more silver this festival season instead of spending on eatables due to the Covid-19 pandemic.”
Silver has been a high beta commodity, with an average beta of 1.4. However, metal also tracks industrial metal price because of its use in factories. The metal segment is also doing well and hence silver has catch-up momentum now.
Kedia said, “The next barrier in the upcoming period is Rs 56,000 as macro uncertainty, negative real interest rates, ample money supply and escalating tensions between the US and China should attract strategic investment in bullion. Though we can see some correction as technicals show, buying on free fall should be the strategy for the rest 2020, keeping Rs 62,000 as the year-end target.”